Oil
hits new five-year low before rallying to $63
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[December 15, 2014]
By Christopher Johnson
LONDON (Reuters) - Brent crude oil hit a
fresh five-year low close to $60 a barrel on Monday after producer group
OPEC restated its determination not to cut output despite a global fuel
glut, but the North Sea benchmark later rallied to around $63.
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Market momentum appeared to be downwards, with analysts saying oil
could plumb new depths before a sustained recovery.
Oil prices have collapsed over the last six months as high-quality,
light crude from North America has overwhelmed demand at a time of
lacklustre global economic growth.
The Organization of the Petroleum Exporting Countries has kept
production steady, worried that any reduction in its output would
have little impact on price and instead mean surrendering market
share.
"The decision has been made. Things will be left as is," OPEC
Secretary-General Abdullah al-Badri told a conference in Dubai on
Sunday. "We agreed that it is important to continue with production
(at current levels) for the ... coming period."
Brent for January <LCOc1> fell to a low of $60.28 a barrel in Asian
trade, down $1.57 and its lowest since July 2009. The futures
contract then rallied to trade around $62.85 by 1015 GMT, up $1.00.
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U.S. crude for January <CLc1> was trading at $58.50 a barrel, up 69
cents, after hitting a low of $56.25 earlier in the day - its
weakest level since May 2009.
Analysts said Monday's bounce was partly speculative buying, and
partly a reaction to news that Libya's two biggest oil ports had
shut due to fighting between armed factions allied to the country's
two rival governments.
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"The market may just have moved down too far too quickly today,"
said Tamas Varga, energy analyst at London brokerage PVM Oil
Associates. "It was a bit overdone and people may be
'bottom-picking'."
Analysts have cut oil price forecasts sharply over the last few
weeks.
"Oil prices may move below $60 per barrel in the near term,"
analysts at Barclays Bank said, but added that "this (level) is not
sustainable in the long run".
Barclays said it expected Brent to average $67 per barrel in the
first half of 2015 and $78 in the second half of next year.
National Australia Bank said on Monday it cut its Brent forecast to
$80 in the fourth quarter of 2014, $75 in the first quarter of 2015
and an average of $80 for all of next year.
(Additional reporting by Henning Gloystein in Singapore; Editing by
Dale Hudson)
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